Posts tagged with Beijing

(III) Real Estate in CHINA: Real Estate fair

20 September, 2012 No Comments

* Overseas Property & Investment Show-Beijing. * International Real Estate Fair-Dalian (April 2011). Exponents of the rapid growth of the housing market in recent years.

Being able to attend to both fairs gave me an idea of ​​the volume of business that the real estate sector moves in this part of the world. It is surprising to see how vague foreign investment is in the residential market, and not just Spanish, but European or American investment in this huge potential market (has an estimated population of 1,500 million). To outline some examples, there were English real estate developers (they’ve been introduced in China via Hong Kong), some Canadian developers, and only one Spanish developer (sold Chinese customers the Spanish product). The remaining foreign representation was made up of some other Asian countries, such as Malaysia, Singapore, Korea, Thailand, always as product vendors of their own material, since they are easily accessible to Chinese customers by its geographical proximity and generally with great weather.

These are some of the market trends offered in both fairs:

1 – A house or an apartment in European style communities, with clear influence from the French, Spanish, or Italian styles…, In many cases, located on the outskirts of large cities, since high speed rails allow a rapid communication with downtown.

2 – At the same time, a futuristic oriental architecture is rising in China (as I stated in my last post;  Mad Architects Studio in Beijing).

3 – A flat in the city, or near it. The last case referred to the second or third ring depending on its distance from the center of the city. For example, we would find these new skyscrapers whose floors are pretty much alike, are built in a simplistic way, do not attempt to follow any architectural trend, and whose solely purpose is to host as many people as possible.  That is to meet the needs arising from the internal migration that China is suffering. These flats are characterized to have 1 or 2 rooms (with little light), and long corridors.
Right now, it seems that China has become the leading country in the amount surface built each year: around 2 Billion square meters per year in recent years. About 30% of the world’s concrete and steel is used in China’s construction. In contrast, these buildings don’t last long, and buyers are not interested in second hand properties. In Europe instead (i.e. Spain), the second hand market is quite active, where remodeling is a common practice because houses last on average 50-60 years. In some cases, especially in large cities even more than 50 or 60 years as we intend to protect our historic patrimony. In addition, the owner of an apartment in Europe is also owner of the land on which the building is built.

In the Chinese model, land is state property and the buyer of an apartment has only the right on the ground for 70 years. The state auctions the land to private or public developers, creating the main source of revenue for local governments. This explains in part why so many are demolished in order to build new ones: the more space, the more buildings can be built.

(II) HOMES in China

27 August, 2011 No Comments

This post is based on the conclusions of a Spanish entrepreneur who moved with his family to China, and he did his own market research to find a home there.

In China, homes are concessions of 70 years (apparently, they are considering to extend the concession to 90 years). If an investor purchases a brand new home, the concession is for the whole period.

In regards to the Real Estate second hand market;

* If the home is bought in the second hand market, the new owner should subtract the years that the home was previously inhabited to the total period of the concession.
* An interesting fact is that there is small market for rehabilitation of buildings or homes. Chinese are not used to perform regular maintenance to a home (ie; to give maintenance to the building’s garage or facades, or to paint the stairs and the house itself). This leads to visible impairments in a short period of time and therefore the buyer chooses to buy a new apartment or house. (This might be a possible gap in the market that should be carefully studied and be a great business opportunity).
* It could be inferred that second-hand homes in China are not as attractive as new homes. The vast majority tend to search for first hand properties due to the large existing supply across the country. We are talking about an immense market of new homes. However, in the country’s main cities, especially in the city centre (first ring) where the housing market has settled, supply of homes in the second hand market does exist.

The loans offered for the purchase of a home, can amount to 50% of the total investment. NO matter if home prices are fixed, one should always negotiate with the seller, in addition to a 2% discount for early payment. The realtor’s commission is paid by both parties.

Since China is a developing country of considerable size, large cities such as Beijing or Shanghai are not the only ones experiencing this kind of growth, existing cities in the suburbs referred to as “third” or “fourth ring” also follow this trend. These peripheral areas are usually well connected with either high speed trains or a growing subway network.

High speed train networks communicate in a quickly manner people’s homes with the city centers and workplaces. As well as the subway, which makes up the price a house along a station and with good communication (as would happen here).

There are ghost towns, mostly bought by investors who want to own. Taking into account that his mentality is geared toward work all day, have few expenses, and thus, saving. This allowed them to pay a flat to a son (usually one child per family), although now  it is changing, as children salaries are older than the parents’.

In order to appreciate the different areas, despite the large price increase that homes have suffered throughout the country, we see that:

The Hainan Province is a high class residential area with tax advantages. There are promotions of modern design, with resorts and golf courses. It is a very nice, and quite wet area due to its proximity to the sea, located in the south of the country. It is best to buy high apartments and away from the sea to avoid deterioration. The capital, Haikou, and the area of Sanya are also quite expensive. Sanya is a tourist town with an artificial island connected by a bridge. The group of MAD Architects has designed PHOENIX 2, a luxury destination that will be completed by 2014. Since Northern China is very cold, this area is considered a good summer place to spend under the sun. Its target customers are Russian and Northern Chinese. The price of housing in the area is rising at a fast pace, reaching five times its annual price.

Other parts of China are more affordable. Areas that can be a good place to reside are: Guangzhou (near Hong Kong), and Guiling, a beautiful city that will be connected to Shanghai by a high speed train (340km / h), that is still under construction. The price of the area will rise considerably. As of 2010, the highest price to pay would be around 2,000 € / m2, but one can also find housing for 200 € / m2 outside the cities.

Beijing, the capital, has a very extreme weather, such that good conditions only last two months because August can reach up to 40º C. It’s a dense city in terms of people and with high pollution levels. It would be interesting to buy a house in the capital for investment purposes.

(I) HOMES in China

25 August, 2011 No Comments

The Chinese market is a market in which companies from all over the world will settle sooner or later, there will be a predictable increase in investment in homes and offices from foreigners. The average national wage is quite low to be able to rent an apartment or office space, which is why it is not a common alternative among Chinese people. When comparing both options, purchasing a space seems to be cheaper in the long run.

Here are some interesting legal/administrative details for foreign investors looking to buy a property in Beijing (published on the web I am not positive; but I suppose that the conditions of foreign real estate investment in Beijing should be similar to the ones in the rest of the country.

Nowadays, it takes a series of permits and requirements that make this transaction a bit more complicated:

1. If you want to purchase a home in Beijing, you would need to request a certificate to the B. Municipal Public Security Bureau of Beijing, and it is mandatory that you have been working or studying in China for at least a year.
2. Foreign companies or organizations that have branches or agencies in Beijing, must certify in a written manner that the homes bought are used only for their own use, and prove their legal status.
3. In the event that the purpose of the purchase of dwellings is to rent, sale, or for commercial use, investors must submit a certificate showing the operations to be performed, and a certificate proving that the company is legally established in the country.
4. Foreign embassies in China, representatives of international organizations, and individuals who possess a “diplomatic status” must present a document from the Ministry of Foreign Affairs in order to buy a home.
5. In other words, what Chinese want is people who buy a home to live there, not for other purposes. They must buy the asset under their name (which, in theory, would exclude the possibility of purchasing it as a foreign corporation).

Real estate market in china

In conclusion, foreigners may only own a house in the capital, Beijing (China), as a dwelling, without the right sell or rent it. The new regulation that limits the real estate investment requires foreign buyers to show that they have been living in the capital for over a year as a student or for work reasons.

To buy a property for investment or business purposes, an investor must first establish a company and obtain approval from the authorities. The Investment in the sector, the constant increase in house prices and its consequences will be discussed in the next post.